Can employee insurance contribution vary based upon age or sex?

[Guest lmr]

Under Obamacare, employer insurance premiums no longer as simple as Single, Married or Family, but rather are based upon Number of children, their ages, age of the employee and age of spouse, and the sex of all. Can an employer who charges an employee a percentage contribution also charge differently to employees based upon sex and age?

[GBurns]

I have not seen or heard of such employer insurance premiums, so I advise that you check that out.

Employee contributions which are controlled by IRC section 125 does not have age as an allowable category. You also would have a problem with ADEA.

If you are a small group/employer your state health insurance laws might also be applicable.

Considering all of the above along with this being new to you, I do suggest that you seek competent advice, preferably legal.

[Clarifying Health]

No. An employee insurance contribution cannot be varied based upon age or sex. It can, however, be varied based upon bone-fide job criteria such as job title, hours worked weekly, location, etc.

For reference, see: http://www.zanebenefits.com/blog/Using-Premium-Reimbursement-Employee-Classes-to-Recruit-and-Retain-Key-Employees

[Bill Presson]

I have not seen or heard of such employer insurance premiums, so I advise that you check that out.

Employee contributions which are controlled by IRC section 125 does not have age as an allowable category. You also would have a problem with ADEA.

If you are a small group/employer your state health insurance laws might also be applicable.

Considering all of the above along with this being new to you, I do suggest that you seek competent advice, preferably legal.

George, what part are you saying you haven't heard/seen? That premiums are now charged by age?

No. An employee insurance contribution cannot be varied based upon age or sex. It can, however, be varied based upon bone-fide job criteria such as job title, hours worked weekly, location, etc.

For reference, see: http://www.zanebenefits.com/blog/Using-Premium-Reimbursement-Employee-Classes-to-Recruit-and-Retain-Key-Employees

How does the concept of the premium reimbursement presented in the Zane link coordinate with the IRS Notice 2013-54? http://www.irs.gov/pub/irs-drop/n-13-54.pdf

[KJohnson]

With regard to age, here is what that EEOC compliance manual says about the ADEA http://www.eeoc.gov/policy/docs/benefits.html#5. 5. Benefit plans funded solely or in part by employees

The following equal cost rules apply where an employer requires that employees contribute to the funding of available benefits and where the premium for those benefits increases with age.⁽²⁰⁾

• An older employee may not be required to pay more for the benefit as a condition of employment. Where the premium has increased for an older employee, the employer must offer the employee the option of withdrawing from the benefit plan altogether. The employer can alternatively offer the employee the option of reducing his/her benefit coverage in order to keep his/her premium cost the same.
• An older employee who chooses to participate in a voluntary plan can be required to pay more for the benefit, but only if the employee does not pay a greater percentage of his/her premium cost than younger employees do.
• An older employee may be offered the option of paying - or paying more -- for the benefit in order to avoid otherwise justified reductions in coverage. Where the employee does choose to pay more, s/he can be charged no more than the amount that is necessary to maintain full coverage.

EXAMPLE - Employer K requires that each of its employees enroll in the company's health plan and pays for 40% of the premium cost for each employee. When CP turns 60, K's insurer notifies K that it will increase the premium for CP's health insurance by 10%. K tells CP that it can no longer afford to pay 40% of the cost for his health insurance, and that he will be required to pay the additional charge himself. K says that because all of its employees must have the same health insurance, it will be forced to terminate CP if he fails to pay the additional premium cost. Because CP is now being forced to pay more for his insurance as a condition of employment, this violates the ADEA.

EXAMPLE - Employer Z offers its employees the option to enroll in its disability benefits plan, but requires that they pay 100% of the premium cost. The premium cost rises as employees grow older; 60 year old employees thus must pay more for the disability benefits coverage offered by Z than 55 year old employees do. As long as the premium increases do not exceed the amount necessary to maintain the same level of coverage for older and younger workers, this is permissible. Enrollment in the plan is voluntary, and employees of all ages bear the same percentage -- here 100% -- of the cost of coverage for their age.

[GBurns]

I understand sex and age but I have not seen "but rather are based upon Number of children, their ages, age of the employee and age of spouse, and the sex of all."